Deferred annuity have in the past been used for both a pension annuity (compulsory purchase annuity) connected with a pension fund or a purchased life annuity, but are more frequently used for immediately needs annuities. It offers an annuity that can be payable at some date in the future. The period between the start date and the maturity date is known as the deferred period and on maturity an income is paid for the rest of the annuitants life.  A financial planner will be able to advise if this is suitable for your requirements.

A deferred period is expensive as there is a cost of delay. During the deferred period it is usual for the annuitant to continue to pay regular premiums. In the event of the death of the annuitant during the deferred period, the premiums are typically returned to the estate and this may also include interest depending on the provider’s terms. For purchase life annuities a cash option instead of the annuity can be offered.

A deferred annuity as part of an immediate needs annuity could be used when a relative enters a nursing home. If the prognosis is they will live for less than 2 years, then a deferred period of 2 years would be chosen. The estate would pay for the first two years of nursing home care and the deferred annuity would pay subsequent long term care costs for the rest of the annuitants life.

Any further questions on deferred annuity
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